Logic of Collective Action October 4 2012 Olson Theory of Groups and Organizations Groups and Group Interest Formal vs informal groups usually face the same difficulties Why don t individuals work toward group achievements Producers of the same good sometimes agree to one price cartel oligopoly There is a theory that says we instinctively join groups bc we want to work together to achieve goals Individual Interest vs Group Interest Tragedy of the commons Individual interests are at odds with the collective interest Problem with group outcomes is that they are non excludable bc they are public goods for the In cartels or oligopolies each business involved has the incentive to cheat members in that group o Group achievement public good non excludable Consequence of public good free rider problem o Why pay if you can get it for free o The group s achievement will lead to personal benefits for ALL members of the group bc the benefits are non excludable o Often time defection is undetected o If all members free ride then the group will not achieve its goal There is a threshold where that will no longer be possible Dealing with Free Riders 1 Coercion can be formal jail or social pressure norms 1 2 Selective incentives i e honor chords if you actively participate in the honor society scholarship for the most involved member o Can be positive or negative 3 Group size o Smaller better at achieving group outcome Coercion and selective incentives are less necessary Defection is easy to identify bc individual contributions weigh more heavily toward group outcome Perceptible interdependence whether the contribution or lack or contribution of any one individual in the group will have a perceptible effect on the burden or benefit of any other individual s in the group May be willing to pay total cost bc personal benefit from group might outweigh individual cost Small can exploit the great heavy individual contributor Inclusive vs Exclusive Goods Inclusive goods the benefit a non cooperator receives is not matched by corresponding losses to those who do cooperate Exclusive goods one non participant can take all the benefits brought about by the action of the collusive forms for himself o All or none participation participation is required o An individual can attempt to be a holdout and demand a greater share of the gain in return for his indispensable support Bargaining power Much more bargaining is likely where 100 participation is required than when some smaller percentage can undertake group oriented activity o More sensitive to the actions of other members Cooperation is Difficult in Large Groups 1 The larger the group the smaller the fraction of the total group benefit any person acting in the group interest receives and the less adequate the reward for any group oriented action and the farther the group falls short of getting an optimal supply of the collective good 2 Since 1 is true the less the likelihood than any small subset of the group much less any single individual will gain enough from getting the collective good to bear the burden of providing even a small amount of it 3 the larger the number of members in the group the higher the organization costs and thus the higher the hurdle than must be jumped before any of the collective good at all can be obtained 2 Privileged vs Intermediate vs Latent Groups Privileged group each of its members or at least some of them has an incentive to see that the collective good is provided even if he has to bear the full burden of providing it himself o Presumption that the collective good will be obtained and it may be obtained without any group organization or coordination whatsoever Intermediate group no single member gets a share of the benefit sufficient to give him an incentive to provide the good himself but which does not have so many members that no one member will notice whether any other member is or is not helping to provide the collective good o The good may or may not be obtained but no collective good may ever be obtained without some group coordination or organization Latent group if one member does or does not help provide the collective good no other one member will be significantly affected and therefore none has any reason to react o No incentive to obtain a collective good o Mobilized latent group a latent group has been led to act in a group interest either through coercion or selective incentives 3 African Politics Economics October 9 2012 Bates Intro Chapters 1 2 5 Puzzle African Agricultural Policy Decline in agricultural production in Africa Decreased agricultural policies are a result of bad political interference Interested in economic development agriculture manufacturing o Africa large agricultural resource sector yet we see increased food imports specific policies are to blame o Political incentives not aligned with economic incentives Why have economic policies failed in Africa Global forces major o African countries are new economic powers inexperienced Cultural ideological factors o Tribal traditions anti imperialism sentiments Economically rational but politically na ve o Know what they are supposed to achieve but do not know the appropriate policies o Rational economic actors responding to domestic pressures What Groups What Do They Want 1 Politicians 2 Farmers o Small farmers peasants o Desire re election maintain office Also desire economic development 4 o Large scale farmers o Desire profit from farming high prices for crops 3 Bureaucracies Marketing Boards o Monopsony single buyer o Set prices different than world prices to remain competitive Stabilize prices if world prices are low Sell at lower prices when world prices are high Especially if a country has one or two cash crops o Desire Maintain control of access to resources maximize budgets job stability 4 Industrialists o Non agricultural businesses domestic and or foreign o Desire subsidies price manipulation exchange rate cheap labor 5 Urban workers o Desire low food costs increased production Policy Tools to Satisfy Groups Cash crops government has a lot of control food Marketing boards transfer money from farmers to other groups o State supposed to store the money i e to pay off debts stabilize economies but instead give it to 1 industrialists 2 urban workers subsidize things like healthcare education 3 bureaucrats often leads to corruption bc in charge of setting prices and managing the largest industry Peasant Response 5 Government wants to